Legal Question in Tax Law in New Jersey

Re: How do Life/health insurance agents hide income

It is possible that several things can be done, but these are only suggestions, not actualities to my knowledge. Having done tax returns for insurance agents, I am aware of many deductions they claim, any of which may be overstated on their tax returns, or in the information provided by the agency or the insurer. Many agencies charge their agents for rent of space, office supplies, leads and other charges. These "costs" come off the top in the calculation of what is reported in the Form 1099 the agent receives. Thus, if these "charges" have been overstated by the agency, the 1099 will be lower than actual income that might be received. The first place to look is at their commission agreement, which should spell out what commissions are payable, on what types of policies and what charges may be used to offset commissions payable. Keep in mind that different types of policies have different commission schedules. Also, commissions vary greatly on new polcies and on renewals, so it is important to know what polciies have been written from year to year. Presuming you have filed joint returns, you would have Schedule "C" on which gross and net is reported. Deductions may have been overstated, to reduce income taxes and self-employment taxes. If you prepared the returns or retained the accountant who prepared it, you could have an exposure if the income were underreported. Finally, some agents get a Form W-2 in addition to a Form 1099. These should be analyzed for any income differentals. This is just a broad overview of what to look for. This reply is to an Internet question and is not intended to be a legal opinion or to create an attorney-client relationship.